One of the first questions to address when you are about to set up a business in France as a sole proprietor is whether to form an EURL (Entreprise Unipersonnelle à Responsabilité Limitée) or a SASU (Société par Actions Simplifiée à Associé Unique).
EURL and SASU are both Limited Companies, LLC equivalent in France, which means that you are not personally liable for the company's debts, since your liability is limited to your contributions to the company.
Differences between the two Limited Companies forms mostly revolves around the following two aspects:
- French Tax Regime applicable to the Company Income and to the Entrepreneur’s remuneration;
- French Social Security Regime of the Manager.
Of course, any such undertaking should be analyzed in detail before deciding on what type of legal status you will utilize when choosing between an EURL or a SASU. It is vital to understand the difference between these structures and how they function.
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I) EURL vs. SASU: Taxation
1. Company Profits
EURL Limited Company profits are, by default, taxed in the hands of the shareholder of the Corporation* (“pass-through”), which means that the Company profits are taxed at the progressive rates applicable to the entrepreneur as a physical person.
However, the sole-shareholder entrepreneur can opt for having the EURL profits subject to French Corporation Tax, which is 15% up to 42.500 € net profits and 25% above that turnover threshold.
Conversely, SASU Limited Company profits are naturally subject to Corporation Tax, with the possibility for the entrepreneur to opt for the “pass-through” regime.
In this latter case, the Company profits are taxed as Personal Income according to the French Progressive Personal Income Tax rates, for a maximum period of 5 years**.
* The sole-proprietor of the EURL who is a natural person can also opt for the French Micro-enterprise regime. This option greatly simplifies the Gérant‘s annual tax return declaration obligations.
** In this case, the Président of the SASU does not pay any social charges on his/her profits and, as a result, cannot benefit from any social security regime.
When the SASU and EURL Limited Companies are subject to Corporation Tax (IS – Impot sur les sociétés), you may pay yourself dividends on the remaining profits after charges and taxes.
In France (2023), you may choose between the two following Dividend Tax regimes:
- 30% Flat-Tax (12,8 % Personal Income Tax + 17,2 of CSG/CRDS/PS) or
- Progressive Personal Income Tax (IR – Impot sur le revenu) rates, after 40% deduction + 6,8% CSG Tax deduction and expenses deduction.
N.B. the dividends paid to the EURL Gérant whose amount exceeds the 10% of [ (share capital) + (prime d’émission) + (shareholder’s account) ] are subject to social security contributions (i.e. a further 40% charge).
II) EURL vs. SASU: Social Security Regime of the Manager
One of the main differences between the EURL and the SASU is the French Social Security (Cotisations sociales) regime applicable to the sole proprietor/ manager of the company.
A) in the EURL Corporation: The sole proprietor and manager of an EURL Limited Company (Gérant) is a Self-Employed Worker (Travailleur Non-Salarié),
which means that the social charges*, are generally as high as around 40% of his/her net remuneration.
These social charges are paid by the Company and are a deductible expense for Tax purposes.
B) in the SASU Corporation: The sole shareholder and manager of a SASU (Président) is a Salaried Worker (Travailleur Salarié),
which means that his/her remuneration is paid through a pay-slip issued by the Company and the social charges amount to around 80% of the his/her net remuneration.
Likewise, these social charges are paid by the Company and are a deductible expense for Tax purposes.
* Unlike the SASU Président, the EURL Gérant pays minimal Social Charges even if he/she receives no remuneration.
- on the one hand, the SASU Manager Social Charges represent a higher cost for the SASU Company compared to the EURL Limited Company,
- on the other hand, the SASU Manager usually gets a better Social Security protection than the EURL Manager, like higher pension, higher sick leave allowances, etc. N.B.: unlike any French salaried worker, the Président of the SASU Limited Company is not entitled to the French job-seeking allowance (Chômage)
The ordinary administrative burden is also different if you set up a business in France using the EURL Limited Company or the SASU Limited Company.
Although both Limited Companies need to prepare and file their own accounts on an annual basis, the EURL Limited Company Manager, as a Self-Employed Worker, does not have a pay-slip to be issued each month by the Company. Indeed, he/she pays himself a remuneration to be declared annually in his/her Personal Income Tax return (Déclaration des revenus) and pays Social Charges monthly or quarterly.
Conversely, the SASU Limited Company Manager, as a Salaried Worker, will have his/her company issue monthly pay-slips and pay social charges monthly to the French Social Security body (URSSAF), for later declaring his/her remuneration in the annual tax declaration.
If you expect your business in France to make high profits (e.g. > 150K €/year) and you consider to pay yourself a high remuneration as the sole-shareholder manager (e.g. > 5K €/month), probably the EURL Limited Company with option for Corporate Tax is the best option.
It is advisable to get in touch with us in order to discuss this latter choice since many aspects come into play.
III) Preparing the Documents for Filing with the Company Registrar
Once you have made up your mind about which Corporation legal form to use in order to do business in France and chosen a name for your company, you need to prepare a file with the following documents:
- Articles of Association
- Share Capital Deposit Certificate in a French bank (Escrow bank account)
- Your Business Address in France
- Certificate of Non-Conviction and Affiliation of the Founder
- Public Announcement of the Company Incorporation on a French Legal Announcements Journal
- Passport/ID – Visa authorizing you to work in France in case you are a non-EU citizen that resides in France
- Authorizations obtained if the activity to be carried out is regulated.
Also, you will have to:
- Declare to the Company Registrar the Ultimate Beneficiary Owner of the Company (UBO)
- Set up your Social Security Status as Manager of the Company (Salarié or Travailleur non Salarié according to the Company form)
- Opt for the Tax Regimes ( Corporate Tax or Personal Income Tax) and VAT regimes (if not exempt).
You will also need to allocate around 250.00 EUR for the Public Announcement Journal Publication and the Company Registrar Fees; those fees vary according to the type of Corporation and the Public Announcement Journal you choose.
We regularly assist our clients with preparing the documentation needed, filing the application with the competent Company Registrar (Tribunal de Commerce) as well as to find the least expensive Public Announcement Journal.
Feel free to get in touch for a first discussion free of charge.
Interested in learning more about managing your Limited Liability Company in France? Continue your journey by reading our next article, ‘The French Corporation’s Annual Legal and Tax Obligations,’ where we delve deeper into the crucial aspects of legal and tax compliance for your business. Expand your knowledge and stay ahead in the ever-evolving French business landscape.
The opinion expressed in this article is for informational purposes only.
This article does not constitute legal advice.
In addition, it is important to remind that each client’s tax issue is different because each client’s personal situation is different.
Should you have a similar tax issue, please contact us for an initial discussion of your case.
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